The obligation of the management of the economy to pay in TL for the sale of securities as part of the fight against the dollarization of the market has caused confusion in the market. The Department of Treasury and Finance felt the need to issue a statement yesterday regarding the decision, in which reactions grew particularly from sectors that use FX-linked commodities. While the assertion that payment for foreign currency checks signed before the decision could be made in foreign currency was a relief to those who had foreign currency checks, it generally did not satisfy them. While the decision is seen as a controlled market economy, it is emphasized that such free market intervention is not applicable. It is pointed out that the application will lead to wasted bureaucratic time, exchange rate risks and additional bank fees to be paid on the supply side of the sectors using raw materials and intermediate products pegged to foreign currencies. The proliferation of disputes between buyer and seller and the risk of a slowdown in trade are worrying market players.
The practice, which caused turmoil in the market, came into effect on April 19 with the statement amending statement No. 32 on the protection of the value of the Turkish currency. In the statement, the obligation to fulfill and accept the payment obligations subject to the contracts for the sale of securities in Turkish currency was introduced. In the first version of the regulation, agreements prior to the date of publication of the press release or the fact that the checks/notes issued would also fall within the scope of the regulation caused strong reactions. However, the decision has raised concerns in the market, especially in sectors where raw materials and inputs are more than 50% imported.
EMPIRE: an artificial application
The ferrous and non-ferrous metals sector, which is approximately 55% dependent on foreign sources for raw materials, is one of the sectors that will be most affected by demand. TOBB Ferrous and Non-Ferrous Metals Assembly Chairman Veysel Yayan said any decision banning the exchange of foreign currencies is an artificial practice and negatively affects free trade. We are of the opinion that it will be withdrawn again when the conditions are met. In the past, we have seen such requests filed and then deleted. Otherwise, such barriers between buyer and seller mean market intervention. It is possible that the seller, who buys the input in foreign currency, passes on the margin to the prices. Chairman of the Board of the Association of Automotive Industry Exporters of Uludag (OIB), Baran Celik, also said that the application will bring additional operation and bureaucracy, and said, “There will be a foreign exchange risk during the production of Alsat”.
EROGLU: Legal disputes may increase
TOBB Plastics, Rubber and Composites Industry Assembly Chairman Yavuz Eroğlu said the regulations would make it difficult to operate in the plastics industry, which has to import 85% of raw materials and where 100% of raw materials are denominated in foreign currencies. Eroğlu said, “With this change, currency fluctuations can be a risk and a potential sticking point. The buying and selling of currencies will be a cycle and will continue with the addition of additional costs,” he said. Assessing the fact that the payment method with foreign currency checks cannot be used, Eroğlu said: “It’s a pity that there is no foreign currency check, the market will find it difficult to transact term. The issuance of TL checks for foreign currency products will lead to an increase in legal disputes between buyers and sellers in the coming days. Stating that it is understandable that the public wants to prevent dollarization, Eroğlu said, “However, if you want to do a controlled economy, the market control mechanisms must also be very good.”
TUNAOGLU: The decision will tire companies, will not increase reserves
Yaman Tunaoğlu, president of the Turkish Electronics Industrialists Association (TESID), pointed out that the decision also strongly affects the electronics industry. Recalling that the cost in the sector is mainly in foreign currencies, Tunaoğlu said: “Companies in the sector must hold foreign currencies in their hands. Because even if he sells with TL, he will have to import again to replace his goods. What will happen now, those who want to buy goods will change currency and pay TL, and those who sell goods will convert TL to foreign currency and buy goods again. In this way, the banks will profit in the meantime. At least 70-80% of the costs incurred by large companies with which we carry out large-scale mass production are indexed to foreign currencies,” he said. Stating that the decision was made in a hurry, Tunaoğlu said: “The decision will tire the companies and the banks will gain in the meantime. The central bank’s foreign exchange reserves will not be affected,” he said.
ORPHAN: It’s panic in the industry
Ahmet Öksüz, chairman of the Istanbul Textile and Commodity Exporters Association (İTHİB), said the textile industry will also be affected by demand. Advocating that sectors using imported raw materials should be exempted from this practice, Öksüz said: “We purchase all products such as cotton raw materials, polyester, chemical dyes on the basis of foreign currency. There was too much dollarization inside, and an implementation was needed in that direction. But right now there is panic in the industry. The buyer with foreign currencies is not likely to sell TL inside, so he will not do this job. Therefore, we do not consider it appropriate to impose such a restriction indoors. The app’s sub-details should be well-worked and stretched,” he said.
Capital market instruments do not fall within the scope of the prohibition
Ministry of Treasury and Finance, effective April 19; He clarified the legislative amendment that obliges Turkish citizens to make payments in TL in exchange agreements concluded between them. According to the Ministry’s statement, the main issues regarding contracts concluded in foreign currencies are as follows: The term “furniture” covers all types of goods and assets that do not fall under the definition of immovable property. Invoices issued before April 19, 2022 can be paid in foreign currencies. The obligation to pay TL covers the contract concluded between residents of Turkey, there is no such obligation for non-residents. The creation and payment of capital market instruments in foreign currencies will not fall within the scope of the prohibition.
Prices may increase against currency risk
Ilker Önel, president of the Istanbul Merchants Club, which operates in the food sector, said the decision will not only affect food but also many sectors, and warned it could slow down trade. Recalling that when a TL invoice is issued in the market, the unit price dollar/ton is also written below the invoice, and an exchange difference invoice is issued if necessary, Önel said that this would not be possible, but that the debt would be fixed in TL. Önel said: “The person issuing the TL bills will bear the currency risk. Companies will also develop formulas against this. This, in turn, will raise prices and affect inflation,” he said.
Minors can live without a bill
Korgün Şengün, chairman of the board of MKS DevO Kimya, argued that the settlement is not enforceable and raises questions about the seriousness of the ruling. Şengün said, “If you try to make an app that doesn’t exist in the market overnight, it won’t be credible and the other party will have to drill it. Things are already running with a thousand and one difficulties. Today, I hear a lot, especially small and medium-sized businesses, say, “So we won’t do postpaid work.” What will you do then if small means come to life without bills? ” mentioned.